Options as a Marketing Tool: Pricing a Promotional Scheme for a Product with a Secondary Market

Research output: Contribution to journalArticlepeer-review

Abstract

Adding options to durable products allows new opportunities for manufacturers and retailers in markets with a secondary market to create better segmentation schemes, provide creative means to differentiate their products and services, and increase the value they offer consumers. This raises the need for sellers to properly price such options. This work presents a few examples of incentive programs for the car industry, develops models and calculates their cost to the seller, demonstrating the applicability of the proposed methodology. Our numerical results indicate that such options are surprisingly inexpensive for car manufacturers and dealers.

Original languageEnglish
Pages (from-to)19-36
Number of pages18
JournalManagerial and Decision Economics
Volume38
Issue number1
DOIs
StatePublished - 1 Jan 2017

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